**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        10-Q/A**
  (Mark
        One)
  [X]
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934For
                  the quarterly period ended March 31, 2005[ 
                  ]
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACTFor
                  the transition period from _________________ to
                  _________________Commission
                  file number 333-83152
 
  Inyx,
                  Inc.
                (Exact
                  name of small business issuer as specified in its
                  charter)Nevada
                (State
                  or other jurisdiction of incorporation or organization)
              75-2870720
                (IRS
                  Employer Identification No.)825
                  Third Avenue, 40thFloor, New York, New York
                (Address
                  of principal executive offices)(212)
                  838-1111
                (Issuer’s
                  telephone number)
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days: Yes [X] No [ 
        ].
  Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act: Yes [  ] No [X ].
  **APPLICABLE
        ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**
 **PROCEEDINGS
        DURING THE PRECEDING FIVE YEARS:**
  Check
        whether the registrant filed all documents and reports required to be filed
        by
        Section l2, 13 or 15(d) of the Exchange Act after the distribution
        of
        securities under a plan confirmed by a court. Yes [  ] No [ 
        ]
  **APPLICABLE
        ONLY TO CORPORATE ISSUERS**
  State
        the
        number of shares outstanding of each of the issuer’s classes of common equity,
        as of May 19, 2005: 38,983,983 shares of common stock.
  
  **EXPLANATORY
          NOTE**
  Inyx,
          Inc. (the "Company") is filing this Amended Form 10-Q (the "Amended Form
          10-Q/A") to restate Items 1 and 2 of Part I contained in the Company's
          Quarterly
          Report on Form 10-Q (the "Original Form 10-Q") for the first quarter ended
          March
          31, 2005 as originally filed with the Securities and Exchange Commission
          on May
          23, 2005. This Amended Form 10-Q/A reflects restatements of the previously
          published unaudited consolidated financial statements as of March 31, 2005
          and
          related changes in the Management's Discussion and Analysis of Financial
          Condition and Results of Operations resulting from the matters discussed
          below.
  The
          restatement resulted from the Company reviewing its original assumption
          of the
          useful life of certain non-contractual customer relationships acquired
          upon the
          acquisition of the business assets of Aventis Pharmaceuticals, Puerto Rico,
          Inc.
          Management concluded that such customer relationships should be assigned
          a
          useful life of ten years. Accordingly, management adjusted its purchase
          price allocation to the fair values of the identifiable tangible and intangible
          assets acquired based on third party appraisals and valuations. The intangible
          assets relating to customer relationship will be amortized on an accelerated
          ten
          year basis. (See Note 3 and Note 8) .
  
 This
          Amended Form 10-Q/A does not attempt to modify or update any other disclosures
          set forth in the Original Form 10-Q, except as required to reflect the
          effects
          of the noted restatements. Additionally, this Amended Form 10-Q/A and the
          Original Form 10-Q is subject to updating and supplementing as provided
          in the
          periodic reports that the Company has filed and will file after the original
          filing date with the Securities and Exchange Commission. In addition, the
          filing
          on this Amended Form 10-Q/A shall not be deemed an admission that the original
          filing, when made, included any untrue statement of material fact or omitted
          a
          material fact necessary to make a statement made therein not misleading.
    
  PART
        I —
        FINANCIAL INFORMATION
  Item
        1. FINANCIAL STATEMENTS




Consolidated
                  Balance Sheets as of March 31, 2005 and December 31, 2004;
              F-2Consolidated
                  Statements of Operations for the three months ended March 31, 2005
                  and
                  2004;
              F-3Consolidated
                  Statements of Cash Flows for three months ended March 31, 2005
                  and
                  2004;
              F-4Notes
                  to Consolidated Financial Statements
              F-5


F-1
  **** **INYX,
        INC.**
 **Consolidated
        Balance Sheets**
 **(Expressed
        in thousands of U.S. dollars except for share amounts)**
 **March
                    31,**
                
                **December
                    31,****2005**
                
                **2004****(Unaudited)****Assets**Current
                    assets:Cash
                
                $
                3,277
                
                $
                336Accounts
                    receivable, net
                
                
                862
                
                
                1,697Inventory,
                    net
                
                
                3,648
                
                
                1,520Prepaid
                    expenses and other current assets
                
                
                1,144
                
                
                2,571Total
                    current assets
                
                
                8,931
                
                
                6,124Property,
                    plant and equipment, net
                
                
                19,502
                
                
                6,230Deferred
                    financing costs, net
                
                
                697
                
                
                651Other
                    assets
                
                
                29
                
                
                45Purchased
                    intangible assets, net
                
                
                9,030
                
                
                1,70529,258
                
                
                8,631Total
                    assets
                
                $
                38,189
                
                $
                14,755**Liabilities
                    and Stockholders'
                    Deficit**Current
                    liabilities:Accounts
                    payable
                
                $
                4,578
                
                $
                4,091Accrued
                    expenses and other current liabilities
                
                
                3,106
                
                
                1,636Deferred
                    revenues
                
                
                3,500
                
                
                108Debt
                    refinanced, net of discount
                
                
                -
                
                
                10,395Current
                    portion of long-term debt
                
                
                9,008
                
                
                4,277Total
                    current liabilities
                
                
                20,192
                
                
                20,507Long-term
                    debt, net of current portion
                
                
                29,296
                
                
                113Total
                    liabilities
                
                
                49,488
                
                
                20,620Commitments
                    and contingenciesStockholders'
                    deficit:Preferred
                    stock - $0.001 par value, 10,000,000 sharesauthorized
                    -0- shares issued and outstanding
                
                
                -
                
                
                -Common
                    stock - $0.001 par value, 150,000,000 sharesauthorized,
                    39,983,983 shares issued and outstandingat
                    March 31, 2005; 38,012,479 shares issued andand
                    outstanding at December 31, 2004
                
                
                40
                
                
                38Additional
                    paid-in capital
                
                
                26,996
                
                
                25,275Accumulated
                    deficit
                
                
                (37,344
                )
                
                (30,334
                )Subscriptions
                    receivable
                
                
                (343
                )
                
                (343
                )Accumulated
                    other comprehensive loss -foreign
                    currency translation adjustment
                
                
                (648
                )
                
                (501
                )Total
                    stockholders' deficit
                
                
                (11,299
                )
                
                (5,865
                )Total
                    liabilities and stockholders' deficit
                
                $
                38,189
                
                $
                14,755
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-2
  **INYX,
        INC.**
 **Consolidated
        Statements of Operations**
 **(Expressed
        in thousands of U.S. dollars, except per share amounts)**
  **For
                      the Three Months EndedMarch
                      31,****2005**
                  
                  
                  **2004****(Unaudited)**Net
                      revenues
                  
                  $
                  2,677
                  
                  $
                  4,526Cost
                      of sales
                  
                  
                  2,535
                  
                  
                  3,911Gross
                      profit
                  
                  
                  142
                  
                  
                  615Operating
                      expenses:Research
                      and development
                  
                  
                  357
                  
                  
                  287General
                      and administrative
                  
                  
                  1,841
                  
                  
                  2,104Selling
                  
                  
                  134
                  
                  
                  84Depreciation
                      and amortization
                  
                  
                  161
                  
                  
                  152Amortization
                      of intangible assets
                  
                  
                  47
                  
                  
                  42Total
                      operating expenses
                  
                  
                  2,540
                  
                  
                  2,669Loss
                      from operations before interest andfinancing
                      costs and income tax benefit
                  
                  
                  (2,398
                  )
                  
                  (2,054
                  )Interest
                        and financing costs (Note 10)
                  
                  
                  4,612
                  
                  
                  1,026Loss
                      before income tax benefit
                  
                  
                  (7,010
                  )
                  
                  (3,080
                  )Income
                      tax benefit
                  
                  
                  -
                  
                  
                  393Net
                      loss
                  
                  $
                  (7,010
                  )
                  $
                  (2,687
                  )Basic
                      and fully diluted loss per share
                  
                  $
                  (0.18
                  )
                  $
                  (0.09
                  )Weighted-average
                      number of shares used incomputing
                      basic and fully diluted loss per share amounts
                  
                  
                  38,296,035
                  
                  
                  28,747,582
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-3
  **** **INYX,
        INC.** **Consolidated
        Statements of Cash Flows** **(Expressed
        in thousands of U.S. dollars)**
  **For
                      the Three Months Ended March 31,****2005**
                  
                  **2004****(Unaudited)**Cash
                      flows from operating activities:Net
                      loss for the period
                  
                  $
                  (7,010
                  )
                  $
                  (2,687
                  )Adjustments
                      to reconcile net loss to net cashprovided
                      by (used in) operating activities:Depreciation
                      and amortization
                  
                  
                  161
                  
                  
                  152Amortization
                      of financing costs and debt discount
                  
                  
                  2,096
                  
                  
                  823Amortization
                      of intangible assets
                  
                  
                  47
                  
                  
                  42Deferred
                      tax asset
                  
                  
                  -
                  
                  
                  (393
                  )Issuance
                      of stock for termination fees and conversion of debt
                  
                  
                  1,577
                  
                  
                  -Reserve
                      for inventory obsolescence
                  
                  
                  64
                  
                  
                  386Provision
                      for bad debts
                  
                  
                  24
                  
                  
                  59Stock
                      option compensation
                  
                  
                  66
                  
                  
                  66Warrants
                      issued for financing & consulting fees
                  
                  
                  162
                  
                  
                  -Issuance
                      of shares for exercise of stock options
                  
                  
                  -
                  
                  
                  290Subscription
                      receivable
                  
                  
                  -
                  
                  
                  (293
                  )Changes
                      in assets and liabilities:Decrease
                      in accounts receivables
                  
                  
                  811
                  
                  
                  46(Increase)
                      decrease in inventory
                  
                  
                  142
                  
                  
                  (212
                  )(Increase
                      ) decrease in prepaid and other current assets
                  
                  
                  1,427
                  
                  
                  (1,308
                  )(Increase)
                      in deferred financing costs
                  
                  
                  (697
                  )
                  
                  (107
                  )Decrease
                      in other assets
                  
                  
                  16
                  
                  
                  -Increase
                      in accounts payable and accrued liabilities
                  
                  
                  1,682
                  
                  
                  135Increase
                      (decrease) in deferred revenues
                  
                  
                  3,392
                  
                  
                  (191
                  )Net
                      cash provided by (used in) operating activities
                  
                  
                  3,960
                  
                  
                  (3,192
                  )Cash
                      flows from investing activities:Purchase
                      of property, plant and equipment
                  
                  
                  (120
                  )
                  
                  (58
                  )Acquisition
                      of Aventis Pharmaceuticals, Puerto Rico
                  
                  
                  (22,744
                  )
                  
                  -Net
                      cash used in investing activities
                  
                  
                  (22,864
                  )
                  
                  (58
                  )Cash
                      flows from financing activities:Borrowings
                      under revolving line of credit, net of fees
                  
                  
                  2,423
                  
                  
                  3,206Proceeds
                      from issuance of long term debt to Westernbank
                  
                  
                  29,187
                  
                  
                  -Proceeds
                      from issuance of long term debt (current portion) to
                      Westernbank
                  
                  
                  1,813
                  
                  
                  -Repayment
                      of long term debt and revolving line of credit to Laurus
                      Funds
                  
                  
                  (10,395
                  )
                  
                  -Payment
                      of fees on long-term debt and revolving line of credit to Laurus
                      Funds
                  
                  
                  (1,739
                  )
                  
                  -Proceeds
                      from issuance of demand notes to shareholders
                  
                  
                  600
                  
                  
                  -Repayment
                      of demand notes to shareholders
                  
                  
                  (67
                  )
                  
                  -Cost
                      of registering stock (SB2 registration)
                  
                  
                  (82
                  )
                  
                  -Repayment
                      of capital lease obligation
                  
                  
                  (42
                  )
                  
                  (34
                  )Net
                      cash provided by financing activities
                  
                  
                  21,698
                  
                  
                  3,172Effect
                      of foreign exchange rate changeson
                      cash and cash equivalents
                  
                  
                  147
                  
                  
                  35Increase
                      (decrease) in cash
                  
                  
                  2,941
                  
                  
                  (43
                  )Cash
                      at beginning of period
                  
                  
                  336
                  
                  
                  796Cash
                      at end of period
                  
                  $
                  3,277
                  
                  $
                  753
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-4
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in
            thousands of U.S. dollars)**
  NOTE
        1 : BUSINESS
        DESCRIPTION
  Inyx,
        Inc. (“Inyx” or the “Company”) through its wholly-owned subsidiaries, Inyx
        Pharma Limited, Inyx Canada Inc. and Inyx USA, Ltd., is a specialty
        pharmaceutical company which focuses on the development and manufacturing
        of
        prescription and over-the-counter aerosol pharmaceutical products and drug
        delivery technologies for the treatment of respiratory, allergy, dermatological
        and topical conditions. Inyx’s client base primarily consists of large ethical
        pharmaceutical corporations, branded generic pharmaceutical distributors,
        and
        biotechnology companies.
  On
        March
        31, 2005, the Company through its wholly-owned subsidiary, Inyx USA, completed
        the acquisition of the business assets of Aventis Pharmaceuticals Puerto
        Rico,
        Inc. (“Aventis PR”) from Aventis Pharmaceuticals, Inc. (“Aventis
        Pharmaceuticals”) a subsidiary of the sanofi-aventis Group, for approximately
        $20.1 million, plus acquisition costs of approximately $2.6 million. Aventis
        PR
        is a pharmaceutical manufacturing operation producing dermatological,
        respiratory and allergy products. Aventis PR manufactured pharmaceutical
        products in accordance with a contract manufacturing agreement with its parent
        company, Aventis Pharmaceuticals. The operating results of the acquired business
        will be included in the Company’s consolidated results from the effective date
        of the acquisition. The Company’s March 31, 2005 balance sheet includes the
        assets acquired.
  Inyx
        currently manages and operates its business as one operating
        segment.
 
 NOTE
        2 : BASIS
        OF PRESENTATION
  The
        financial information presented herein should be read in conjunction with
        our
        consolidated financial statements for the year ended December 31, 2004. The
        accompanying consolidated financial statements for the three months ended
        March
        31, 2005 and 2004 are unaudited but, in the opinion of management, include
        all
        necessary adjustments (consisting of normal, recurring in nature) for a fair
        presentation of the financial position, results of operations and cash flow
        for
        the interim periods presented. Interim results are not necessarily indicative
        of
        results for a full year. Therefore, the results of operations for the three
        months ended March 31, 2005 are not necessarily indicative of operating results
        to be expected for the year.
  Significant
        accounting policies are detailed in our annual report on Form 10-KSB for
        the
        year ended December 31, 2004.
  All
        intercompany accounts and transactions have been eliminated in
        consolidation.
  Certain
        amounts from prior consolidated financial statements and related notes have
        been
        reclassified to conform to the current period presentation
  NOTE
        3 : ACQUISITION
        OF AVENTIS PHARMACEUTICALS
  On
        March
        31, 2005, Inyx USA acquired the business assets of Aventis PR from the
        sanofi-aventis Group for approximately $20.1 million plus acquisition
        transaction costs of $2.6 million. The acquisition was accounted for as a
        business combination in accordance with Statement of Financial Accounting
        Standard No. 141 *“Business
        Combinations”.* In
        connection with this acquisition, Inyx USA paid cash of approximately $19.7
        million upon closing (an additional $365,000 remains payable at March
        31,
        2005) and incurred approximately $2.6 million in direct transaction costs.
        The
        acquisition was funded through a credit facility
        from the Business Credit Division of Westernbank Puerto Rico; Puerto Rico’s
        second largest bank, and a wholly owned subsidiary of W Holding Company,
        Inc.
        (“Westernbank”) . 
        The Westernbank financing consists of a revolving loan, three term loans,
        and a
        mezzanine loan, in the agregate refered to as the “Westernbank Credit Facility”
        (See Note 10).
  The
        purchase price was allocated to the identifiable net assets acquired including
        the identifiable intangible assets based on their estimated fair market values
        at the date of acquisition as determined by the Valuation Services Practice
        of
        BearingPoint, Inc.
  The
        fair
        value of the assets acquired from the transaction totaled approximately $62.9
        million based on independent third-party appraisals and valuations, which
        resulted in negative goodwill of $40.2 million. The negative goodwill was
        proportionately allocated over the non-current tangible and intangible assets
        acquired as follows:
  F-5
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in
            thousands of U.S. dollars)**
  Fair
                      Value of
                  
                  
                  Allocation
                      of
                  
                  
                  Allocation
                      ofAssets
                  
                  
                  negative
                  
                  
                  Purchase
                      priceacquired
                  
                  
                  goodwill
                  
                  
                  of
                      assets acquiredLand
                  
                  $
                  3,040
                  
                  $
                  (2,017
                  )
                  $
                  1,023Building
                  
                  
                  12,700
                  
                  
                  (8,425
                  )
                  
                  4,275Machinery
                      and equipment
                  
                  
                  22,725
                  
                  
                  (15,076
                  )
                  
                  7,649Computer
                      hardware and software
                  
                  
                  269
                  
                  
                  (178
                  )
                  
                  91*Identifiable
                      intangible assets*Customer
                      contracts
                  
                  
                  4,800
                  
                  
                  (3,184
                  )
                  
                  1,616Customer
                      relationships
                  
                  
                  17,100
                  
                  
                  (11,344
                  )
                  
                  5,756Inventory
                  
                  
                  2,334
                  
                  
                  -
                  
                  
                  2,334**Total**
                  
                  **$**
                  **62,968**
                  
                  **$**
                  **(40,224**
                  **)**
                  **$**
                  **22,744**
  The
          fair
          values assigned to the acquired assets are based on estimates and assumptions
          provided and other information compiled by management, including independent
          valuations, that utilize established valuation techniques appropriate for
          the
          industry in which the Company operates. The property, plant and equipment
          will
          be depreciated based on the Company’s existing depreciation policies. The
          intangible asset, which represents the value assigned to customer contracts,
          will be amortized on a straight line basis over three years. The intangible
          asset which represents the value assigned to customer relationships will
          be
          amortized using the declining balance method of accelerated amortization
          over
          ten years.
 Pro
        Forma Results
  The
        following unaudited proforma summary information was based upon assumptions
        deemed appropriate by the Company and presents the financial information
        as if
        the acquisition of Aventis PR had taken place at the beginning of the periods
        presented. These pro forma results have been prepared for comparative purposes
        and are not indicative of what would have occurred had the acquisition occurred
        at the beginning of the periods presented nor are they indicative of future
        results.
  The
          most
          significant pro forma adjustments reflect the new debt incurred to finance
          the
          purchase of Aventis PR and the refinancing of existing debt to Lauus Master
          Funds Ltd ( "Laurus Funds"); the depreciation and amortization were also
          adjusted to reflect the fair market values of the tangible and intangible
          assets
          acquired on March 31, 2005.
 Pro
                  Forma
                For
                  the Three Months EndedMarch 31,2005
              
              2004Pro
                  forma net revenues
              
              $
              6,347
              
              $
              7,561Pro
                  forma loss from operations
              
              $
              (3,405
              )
              $
              (2,793
              )
  NOTE
        4: ACCOUNTSRECEIVABLE, NET
  Accounts
        receivable consist of the following:
 March
                  31,
                2005
                (Unaudited)
              
              December
                  31,
                2004Trade
                  receivables
              
              $
              1,038
              
              $
              1,849Less
                  allowance for doubtful accounts
              
              
              (176
              )
              
              (152
              )$
              862
              
              $
              1,697
 
 F-6
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in
            thousands of U.S. dollars)**
  There
        was
        a bad debt expense of $24,000 and $59,000 for the three months ended
        March
        31, 2005 and 2004, respectively.
  NOTE
        5: INVENTORY,
        NET
  Inventory
        is comprised of the following:
 March
                  31,
                2005
                (Unaudited)
              
              December
                  31,
                2004Finished
                  goods
              
              $
              12
              
              $
              107Work
                  in process
              
              
              527
              
              
              551Raw
                  materials
              
              
              3,649
              
              
              1,3384,188
              
              
              1,996Less
                  provision for obsolescence
              
              
              (540
              )
              
              (476
              )$
              3,648
              
              $
              1,520
  N OTE
        6 : PROPERTY,
        PLANT AND EQUIPMENT, NET
  Property,
        plant and equipment **** consist
        of the following:
 March
                  31,
                2005
                (Unaudited)
              
              December
                  31,2004Land
              
              $
              1,569
              
              $
              546Buildings
              
              
              5,334
              
              
              1,059Machinery,
                  equipment and office furniture
              
              
              11,190
              
              
              3,541Computer
                  hardware and software
              
              
              193
              
              
              10218,286
              
              
              5,248Less
                  accumulated depreciation
              
              
              (1,044
              )
              
              (898
              )17,242
              
              
              4,350Computer
                  hardware and software under capital lease
              
              
              407
              
              
              407Less
                  accumulated amortization
              
              
              (83
              )
              
              (68
              )324
              
              
              339Equipment
                  held for future use (a)
              
              
              1,541
              
              
              1,541Construction
                  in progress (b)
              
              
              395
              
              
              -$
              19,502
              
              $
              6,230
  For
        the
        three months ended March 31, 2005, depreciation of property, plant and equipment
        was approximately $146,000 and
        for
        the same period in 2004 it was approximately $138,000. Amortization for
        equipment under capital leases was approximately $15,000 and $14,000
        for
        the three months ended March 31, 2005 and 2004, respectively.
  (a)
        The
        equipment held for future use consists of a manufacturing line which the
        Company
        is in the process of developing. Management expects to incur additional costs
        to
        equip this manufacturing line for the filling and gassing of non-CFC aerosol
        pharmaceutical products.
  (b)
        The
        construction in progress relates to costs associated with building a
        manufacturing line for a customer and various other ongoing projects. Management
        expects to incur additional costs to complete the manufacturing line for
        production and the various other projects estimated to be in excess of $3.0
        million over the next two years. As of March 31, 2005, the Company
        has
        approximately $230,000 of outstanding commitments relating to these projects.
  NOTE
        7 : DEFERRED
        FINANCING COSTS, NET
  As
        of
        December 31, 2004, deferred financing costs, net are comprised of fees related
        to convertible debt issued to Laurus Master Funds, Ltd (“Laurus Funds”) in 2003
        and amended in 2004. All amounts due to Laurus Funds were refinanced on March
        31, 2005 through the Company's new Westernbank Credit Facility. (See Note
        10)
        The unamortized deferred financing costs of approximately $651,000 relating
        to
        Laurus Funds were charged to interest and financing costs on the Company’s
        consolidated statement of operations for the three months ended March 31,
        2005.
  F-7
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in
            thousands of U.S. dollars)**
  As
        of
        March 31, 2005, the deferred financing costs, net are related to the Westernbank
        Credit Facility and will be amortized over a three year period.
  Deferred
        financing costs, net consist of the following:
 March
                  31,
                2005
                (Unaudited)
              
              December
                  31,
                2004Deferred
                  financing costs
              
              $
              1,724
              
              $
              1,027Less
                  accumulated amortization
              
              
              (1,027
              )
              
              (376
              )$
              697
              
              $
              651
  For
        the
        three months ended March 31, 2005 and 2004, the amortization of deferred
        financing costs approximated $651,000 and $77,000, respectively.
  NOTE
        8 : PURCHASED
        INTANGIBLE ASSETS, NET
  Purchased
        intangible assets consist of the following:
  March
                      31,
                    2005
                    (Unaudited)
                  
                  
                  December
                      31,
                    2004Intangible
                    assets subject to amortization:Customer
                    Relationships (accelerated ten year life)
                  
                  $
                  5,756
                  
                  $
                  -Customer
                      Contracts  (straight line 3 year life)
                  
                  
                  1,616
                  
                  
                  -Customer
                      list  (straight line 12 year life)
                  
                  
                  1,280
                  
                  
                  1,280Know-how 
                      (straight line 10 year life)
                  
                  
                  598
                  
                  
                  598Patent 
                    (straight line 7 year life)
                  
                  
                  132
                  
                  
                  1329,382
                  
                  
                  2,010Less
                      accumulated amortization
                  
                  
                  (352
                  )
                  
                  (305
                  )$
                  9,030
                  
                  $
                  1,705
 Intangible
        assets subject to amortization:
  Purchased
        intangible assets are carried at cost less accumulated amortization. For
        the
        three months ended March 31, 2005 and 2004, amortization expense related
        to
        intangible assets totaled approximately $47,000, and $42,000 respectively.
        The
        aggregate estimated amortization expense for intangible assets as of March
        31,
        2005 for each of the following five years and thereafter is as follows:
  2005
              
              $
              1,0832006
              
              
              1,4282007
              
              
              1,4072008
              
              
              9792009
              
              
              818Thereafter
              
              
              3,315Total
              
              $
              9,030
  
 F-8
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in
            thousands of U.S. dollars)**
  NOTE
        9: DEFERRED
        REVENUES
  On
        March
        31, 2005, the Company received an advance of $3.5 milion from Aventis PR
        for
        strategic and business development activities to be carried out by the Company
        in 2005, in collaboration with Aventis PR and it's parent Company
        sanofi-aventis. This amount was classified as deffered revenue and
        will be
        recognized into income as revenue is earned.
  Deferred
        revenues of $108,000 at December 31, 2004 related to an advance from Stiefel
        Laboratories, Inc. (“Stiefel”) for services that were carried out
        during the first three months of 2005.
  NOTE
        10: LONG-TERM
        DEBT, NET OF CURRENT PORTION
  Long-term
        debt, net of current portion consists of the following:
 March
                  31,
                2005
                (Unaudited)
              
              December
                  31,2004Prime
                  + 1% Secured Revolving loan due to Westernbank
              
              $
              2,423
              
              $
              -Prime
                  + 2% Secured Term Promissory Note B issued to Westernbank
              
              
              14,200
              
              
              -Prime
                  + 2% Secured Term Promissory Note C issue to Westernbank
              
              
              11,800
              
              
              -15%
                  Term loan D Promissory Note issued to Westernbank
              
              
              5,000
              
              
              -Revolving
                  line of credit due to Laurus Funds, net of debt discount of $0
                  at March
                  31, 2005 and $740,000 at December 31, 2004, paid from proceeds
                  of
                  Westernbank on March 31, 2005
              
              
              -
              
              
              6,3687%
                  convertible term note due to Laurus Funds, collateralized by accounts
                  receivable and other assets of the Company, net of debt discount
                  of $0 at
                  March 31, 2005 and $692,000 at December 31, 2004, paid
                  fromproceeds
                  of Westernbank on March 31, 2005
              
              
              -
              
              
              4,027Uncollateralized
                  6% convertible promissory note due to customer,
              
              
              4,013
              
              
              4,013Uncollateralized
                  7% to 18% demand notes due to stockholders and various executives
                  of the
                  Company, principal and interest due on demand
              
              
              683
              
              
              150Capital
                  lease obligations, due to financial institutions, collateralized
                  by
                  software and equipment, due in monthly installments of $14,000
                  including
                  interest of 10% to 27%, through 2006
              
              
              185
              
              
              22738,304
              
              
              14,785Less
                  debt refinanced, net of discount
              
              
              -
              
              
              (10,395
              )Less
                  current portion
              
              
              (9,008
              )
              
              (4,277
              )Long-term
                  debt, net of current portion
              
              $
              29,296
              
              $
              113
  On
        March
        31, 2005 the Company obtained a new non-dilutive asset based secured credit
        facility from Westernbank Puerto Rico totaling $46 million. The facility
        is
        comprised of a revolving loan (the “Revolver”) of up to $10 million for purposes
        of working capital, a series of three term loans (Term loan “A”, “B” and “C”)
        amounting in aggregate to up to $31 million for purpose of refinancing the
        indebtedness to Laurus Funds and purchasing the assets of Aventis PR, and
        a
        mezzanine loan (Term loan “D”) of up to $5 million for the purpose of funding
        construction or new equipment. The revolver is secured by the eligible
        receivables and inventory. The term notes are collateralized by substantially
        all the property of the Company and its subsidiaries whether now owned or
        thereafter to be acquired. Interest is based on Westernbank’s prime rate. The
        prime rate at March 31, 2005 was 5.75%.
  F-9
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in
            thousands of U.S. dollars)**
  The Westernbank
        Credit Facility is automatically renewable after the initial three year period
        ending on March 31, 2008 on a year to year basis, unless terminated by the
        Company or Westernbank.
  For
        the three months ended March 31, 2005, the
        Company accelerated its amortization of deferred charges of approximately
        $651,000, debt discount of approximately $1.4 million and recorded an early
        termination fee of $1.6 million related to the repayment of the debt to Lauus
        Funds.
  NOTE
        11: NET
        LOSS PER SHARE
  The
        Company follows the guidelines of Statement of Financial Accounting Standards
        No. 128, “ *Earnings
        Per Share* ”
        (“SFAS
        No.128”) in calculating its loss per share. SFAS No.128 states basic and diluted
        earnings per share are based on the weighted average number of shares of
        common
        stock and potential common stock outstanding during the period. Potential
        common
        stock equivalents for purposes of determining diluted earnings per share
        include
        the effects of dilutive stock options, warrants and convertible securities.
        The
        effect on the number of shares of such potential common stock equivalents
        is
        computed using the treasury stock method or the if-converted method, as
        applicable. The Company has excluded all outstanding options and warrants
        as
        well as shares issued upon conversion of convertible debt from the calculation
        of diluted net loss per share because these securities are anti-dilutive.
  Accordingly,
        as of March 31, 2005, and December 31, 2004, the Company had common stock
        equivalents of approximately 25,055,687 and 25,155,687 shares respectively,
        related to options and warrants; and approximately 18,375,000 related to
        shares
        to be issued upon the conversion of the convertible debt at December 31,
        2004.
        There was no convertible debt outstanding at March 31, 2005.
  NOTE
        12: COMMITMENTS
        AND CONTINGENCIES
  Leases:
  The
        Company has commitments under various long-term operating lease agreements
        for
        various premises. For the three months ended March 31, 2005 and 2004, total
        rent
        of office space was approximately $40,000, and $36,000, respectively.
        In addition to rent, the Company and its subsidiaries are responsible for
        operating costs, real estate taxes and insurance. As of March 31, 2005, future
        minimum annual rental commitments under operating leases are as follows:
  2005
              
              $
              4092006
              
              
              4182007
              
              
              3902008
              
              
              1862009
              
              
              98Thereafter
              
              
              1,112Total
              
              $
              2,613
  Legal
        Matters:
  The
        Company and its
        subsidiaries are subject to claims and lawsuits arising in the ordinary course
        of business. Management, in consultation with its legal advisors, believes
        that
        the outcome of such legal matters are remote and unlikely to have a material
        adverse effect on the Company’s financial position or operating
        results.
  Key
        Suppliers:
  The
        Company purchases raw materials and components from a limited number of key
        suppliers. A loss of any one of these suppliers would have a material adverse
        effect on the Company’s operations.
  Other:
  As
        of
        March 31, 2005, the Company has approximately $230,000 of outstanding
        commitments related to capital projects currently in
        progress.
 The
          Company approached Stiefel in June 2005 with a request to restructure the
          payments under its 6% uncollateralized Promissory Note to Stiefel. In the
          course
          of such discussions the Company did not make the first restructured note
          payment
          on June 30, 2005, and Stiefel demanded acceleration and repayment of the
          Note.
          The Company paid the June 30 installment in July 2005 and is
          continuing discussions with Stiefel regarding the payment terms
          of the
          balance of the note and other commercial matters between the parties, none
          of
          which have been finalized at this time.
  F-10
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in
            thousands of U.S. dollars)**
  NOTE
        13: SUBSEQUENT
        EVENTS
  On
        April
        1, 2005, the Company granted 300,000 stock options to the Company’s newly
        appointed Chief Financial Officer under the 2003 Stock Option Plan with an
        exercise price of $1.01. The options will vest over a three year
        period.
  On
        April
        6, 2005, our subsidiary, Inyx Pharma and Stiefel entered into a renewal of
        a
        Promissory Note originally dated March 6, 2003 payable to Stiefel in the
        principal amount of 2.5 million Great Britain Pounds. In connection with
        the
        refinancing, Stiefel agreed to terminate its Option to convert such debt
        into 4
        million shares of common stock of the Company. The new Note is payable quarterly
        in three equal installments starting June 30, 2005. Furthermore, once the
        note
        is paid off, the cross default condition on the Manufacturing and Supply
        Agreement dated March 6, 2003, will be removed and a cancellation letter
        will be
        reissued on December 31, 2005. The
        effects of the renewal have been reflected in these financial
        statements.
  Subsequent
        to March 31, 2005, the Company issued a Promissory note for $780,000 to
        Westernbank against the Term Loan A facility collateralized by the Company’s
        capital expenditures. The term loan bears interest of prime plus 2% with
        monthly
        repayments starting on July 1, 2005. Interest payments are due starting May
        1,
        2005.
  NOTE
        14: STOCKHOLDERS’
        DEFICIT
  Between
        the period of January 14, 2005 and January 26, 2005 the Company issued 380,000
        shares of its restricted common stock as payment of $304,000 of
        principal due under the Laurus Note. On February 28, 2005,
        the Company
        issued 300,000 five-year stock purchase warrants to Laurus in conjunction
        with a
        waiver received for any Events of Default. The fair value of the warrants
        was
        approximately $162,000 based on the Black-Scholes option pricing model with
        the
        following weighted average assumption: a risk free interest rate of 3.14%,
        an
        expected life of four years, a volatility factor of 57%, and a dividend yield
        of
        0%. This amount was charged to interest and financing costs on the consolidated
        statement of operations. Subsequently, on March 31, 2005, the Company issued
        1,591,504 shares of the Company’s restricted common stock valued at
        approximately $1.3 million as payment of certain early termination fees in
        connection with the repayment of all amounts due to Laurus Funds as of March
        31,
        2005. Such repayment amounted to approximately $12.3 million.
  During
        the three months ended March 31, 2005, the Company recorded approximately
        $66,000 of additional paid-in capital resulting from stock options which
        vested
        during the period. The fair value was calculated using the Black-Scholes
        option
        pricing model with the following assumptions; a risk free interest rate of
        3.14%, an expected life of four years, a volatility factor of 66%, and a
        dividend yield of 0%. This amount is included in general and administrative
        expenses in the consolidated statement of operations.
  NOTE
        15: ACCUMULATED
        COMPREHENSIVE LOSS
  The
        accumulated comprehensive loss reflected in the consolidated statement of
        changes in stockholders’ deficit and other comprehensive loss represents
        accumulated foreign currency translation adjustments associated with the
        conversion of the Company’s United Kingdom and Canadian subsidiary’s accounts to
        US dollars. These amounts are not adjusted for income taxes as they relate
        to an
        indefinite investment in a foreign subsidiary.
  NOTE
        16 : WARRANTS
  During
        the three months ended March 31, 2005, the Company issued to Laurus Funds,
        300,000 five year warrants in conjunction with a waiver received and
        certain amendments to the registration rights agreements withLaurus
        Funds. The waiver waived any Events of Default that may have occurred
        under the credit facility and term note due to Laurus Funds. These warrants
        allow the holders to purchase the Company’s common stock at a price of $0.95 per
        share. The fair value of these warrants was estimated using the Black-Scholes
        option pricing model with the following weighted average assumption: a risk
        free
        interest rate of 3.14%, an expected life of four years, a volatility factor
        of
        57%, and a dividend yield of 0%. The value assigned to these warrants was
        approximately $162,000 and was charged as interest and financing costs to
        the
        Company’s consolidated statement of operations for the three months ended March
        31, 2005.
  F-11
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in
            thousands of U.S. dollars)**
  Comparatively,
        for the three months ended March 31, 2004, the Company issued 495,000 warrants
        to Laurus Funds in conjunction with a credit facility established
        in December 2003. These warrants allow the holders to purchase the Company’s
        common stock at prices ranging from $1.25 to $1.75 per share. The fair value
        of
        these warrants was estimated using the Black-Scholes option pricing model
        with
        the following weighted average assumption: a risk free interest rate of 3.14%,
        an expected life of four years, a volatility factor of 57%, and a dividend
        yield
        of 0%. The value assigned to these warrants was approximately $309,000 and
        was
        charged as interest and financing costs to the Company’s consolidated statement
        of operations for the three months ended March 31, 2004.
  NOTE
        17: SUPPLEMENTAL
        CASH FLOW INFORMATION
 For
                    the Three Months Ended
                  March
                    31,2005
                
                2004(Unaudited)**Supplemental
                    Disclosure of Cash Flow Information:**Cash
                    paid during the period for interest
                
                $
                644
                
                $
                28**Supplemental
                    Disclosure of Non-Cash Financing Activities:**Issuance of
                    380,000 shares as
                    payment of debt and issuance of 1,591,504 shares for payment
                    of
                    termination fee toLaurus Funds (conversion price $0.80 per
                    share)
                
                
                1,577
                
                
                -Issuance
                    of stock options
                
                
                66
                
                
                356Warrants
                    issued for consulting and financing fees
                
                
                162
                
                
                932Accelerated
                    amortization of financing costs
                
                
                651
                
                
                -Accelerated
                  amortization of debt discount
                
                
                1,445
                
                
                -**Supplemental
                    Disclosure of Non-Cash Investing Activities**Acquisition
                    of property, plant and equipment, under construction in
                    progress
                
                
                275
                
                
                -
 F-12
  **UNAUDITED
        PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS**
  The
        following unaudited consolidated pro forma statements of operations presented
        herein for the three months ended March 31, 2005 and March 31, 2004 give
        effect
        to the acquisition of the business assets of Aventis PR as if the acquisition
        had taken place at the beginning of the periods presented.
  The
        historical financial data is derived from the historical financial statements
        of
        both companies which were prepared in accordance with generally accepted
        accounting principles in the United States of America. The preparation of
        the
        unaudited pro forma statement of operations for Aventis PR included the
        adjustment to back-out sales attributable to  Aventis intercompany
        sales
        and customer contracts not renewed at the date of acquisition.
  The
        acquisition was accounted for using the purchase method of accounting. The
        unaudited pro forma financial data is not necessarily indicative of the
        operations had the acquisition taken place at the beginning of the periods
        presented and are not intended to project the Company’s results of operations
        for any future period.
  The
        unaudited pro forma adjustments and certain assumptions are described in
        the
        accompanying notes which should be read in conjunction with this unaudited
        pro
        forma consolidated statement of operations.


**Unaudited
        Consolidated Pro Forma Statement of Operations**
 **For
        the Three Months Ended March 31, 2005**
 (Expressed
        in thousands of U.S. dollars)
 Aventis
                        Pharmaceuticals Puerto Rico, Inc.
                    
                    
                    Adjustment(1)
                    
                    
                    
                    
                    
                    Aventis
                        Puerto Rico (acquired)
                    
                    
                    Inyx,
                        Inc.
                    
                    
                    Pro
                        forma Adjustments(2)
                    
                    
                    
                    
                    
                    CombinedNet
                        Revenues
                    
                    $
                    15,575
                    
                    $
                    (11,905
                    )
                    
                    (a
                    )
                    $
                    3,670
                    
                    $
                    2,677
                    
                    $
                    -
                    
                    
                    
                    
                    $
                    6,347Cost
                        of sales
                    
                    
                    12,242
                    
                    
                    (10,261
                    )
                    
                    
                    
                    
                    1,981
                    
                    
                    2,535
                    
                    
                    -
                    
                    
                    
                    
                    
                    4,5163,333
                    
                    
                    (1,644
                    )
                    
                    
                    
                    
                    1,689
                    
                    
                    142
                    
                    
                    -
                    
                    
                    
                    
                    
                    1,831Operating
                        expenses:Research
                        and development
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    357
                    
                    
                    -
                    
                    
                    
                    
                    
                    357General
                        and administrative expenses
                    
                    
                    2,609
                    
                    
                    (1,729
                    )
                    
                    
                    
                    
                    880
                    
                    
                    1,841
                    
                    
                    -
                    
                    
                    
                    
                    
                    2,721Selling
                        expenses
                    
                    
                    -
                    
                    
                    12
                    
                    
                    
                    
                    
                    12
                    
                    
                    134
                    
                    
                    -
                    
                    
                    
                    
                    
                    146Depreciation
                        and amortization
                    
                    
                    0
                    
                    
                    71
                    
                    
                    
                    
                    
                    71
                    
                    
                    161
                    
                    
                    220
                    
                    
                    (a
                    )
                    
                    452Amortization
                        of intangibles
                    
                    
                    0
                    
                    
                    226
                    
                    
                    
                    
                    
                    226
                    
                    
                    47
                    
                    
                    89
                    
                    
                    (b
                    )
                    
                    362Total
                        operating expenses
                    
                    
                    2,609
                    
                    
                    (1,420
                    )
                    
                    
                    
                    
                    1,189
                    
                    
                    2,540
                    
                    
                    309
                    
                    
                    
                    
                    
                    4,038Income(loss)
                        from continuing operations beforeinterest,
                        other and income tax benefit (expense)
                    
                    
                    724
                    
                    
                    (224
                    )
                    
                    
                    
                    
                    500
                    
                    
                    (2,398
                    )
                    
                    (309
                    )
                    
                    
                    
                    
                    (2,207
                    )Interest
                        expense(income)
                    
                    
                    (1,159
                    )
                    
                    1,524
                    
                    
                    
                    
                    
                    365
                    
                    
                    4,612
                    
                    
                    (3,779
                    )
                    
                    (c
                    )
                    
                    1,198Other
                        expense (income)
                    
                    
                    7,965
                    
                    
                    (7,965
                    )
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -Income
                        (loss) from continuing operations beforeincome
                        tax benefit (expense)
                    
                    
                    (6,082
                    )
                    
                    6,217
                    
                    
                    
                    
                    
                    135
                    
                    
                    (7,010
                    )
                    
                    3,470
                    
                    
                    
                    
                    
                    (3,405
                    )Income
                        tax benefit (expense)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -Net
                        income (loss)
                    
                    $
                    (6,082
                    )
                    $
                    6,217
                    
                    
                    
                    
                    $
                    135
                    
                    $
                    (7,010
                    )
                    $
                    3,470
                    
                    
                    
                    
                    $
                    (3,405
                    )Basic
                        and fully diluted income (loss) per share
                    
                    
                    N/A
                    
                    
                    N/A
                    
                    
                    
                    
                    
                    N/A
                    
                    $
                    (0.18
                    )
                    $
                    5.04
                    
                    
                    
                    
                    $
                    (0.09
                    )-Weighted-average
                        number of shares used in computingbasic
                        and fully diluted loss per share amounts
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    38,296,035
                    
                    
                    687,948
                    
                    
                    
                    
                    
                    38,983,983


13
 
  **Unaudited
                Consolidated Pro Forma Statement of Operations**
 **For
                the Three Months Ended March 31, 2004**
 (Expressed
            in thousands of U.S. dollars)
  Aventis
                        Pharmaceuticals Puerto Rico, Inc.
                    
                    
                    Adjustments(1)
                    
                    
                    
                    
                    
                    Aventis
                        Puerto Rico (acquired)
                    
                    
                    Inyx,
                        Inc.
                    
                    
                    Pro
                        forma Adjustment(2)
                    
                    
                    
                    
                    
                    CombinedNet
                        Revenues
                    
                    $
                    17,761
                    
                    $
                    (14,727
                    )
                    
                    (a
                    )
                    $
                    3,034
                    
                    $
                    4,526
                    
                    $
                    -
                    
                    
                    
                    
                    $
                    7,560Cost
                        of sales
                    
                    
                    12,677
                    
                    
                    (10,723
                    )
                    
                    
                    
                    
                    1,954
                    
                    
                    3,911
                    
                    
                    -
                    
                    
                    
                    
                    
                    5,8655,084
                    
                    
                    (4,004
                    )
                    
                    
                    
                    
                    1,080
                    
                    
                    615
                    
                    
                    -
                    
                    
                    
                    
                    
                    1,695Operating
                        expenses:Research
                        and development
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    287
                    
                    
                    -
                    
                    
                    
                    
                    
                    287General
                        and administrative expenses
                    
                    
                    2,354
                    
                    
                    (1,468
                    )
                    
                    
                    
                    
                    886
                    
                    
                    2,104
                    
                    
                    -
                    
                    
                    
                    
                    
                    2,990Selling
                        expenses
                    
                    
                    -
                    
                    
                    13
                    
                    
                    
                    
                    
                    13
                    
                    
                    84
                    
                    
                    -
                    
                    
                    
                    
                    
                    97Depreciation
                        and amortization
                    
                    
                    1,144
                    
                    
                    (1,090
                    )
                    
                    
                    
                    
                    54
                    
                    
                    152
                    
                    
                    237
                    
                    
                    (a
                    )
                    
                    443Amortization
                        of intangibles
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    42
                    
                    
                    315
                    
                    
                    (b
                    )
                    
                    357Total
                        operating expenses
                    
                    
                    3,498
                    
                    
                    (2,545
                    )
                    
                    
                    
                    
                    953
                    
                    
                    2,669
                    
                    
                    552
                    
                    
                    
                    
                    
                    4,174Income(loss)
                        from continuing operations beforeinterest,
                        other and income tax benefit (expense)
                    
                    
                    1,586
                    
                    
                    (1,459
                    )
                    
                    
                    
                    
                    127
                    
                    
                    (2,054
                    )
                    
                    (552
                    )
                    
                    
                    
                    
                    (2,479
                    )Interest
                        expense (income)
                    
                    
                    (507
                    )
                    
                    904
                    
                    
                    
                    
                    
                    397
                    
                    
                    1,026
                    
                    
                    (716
                    )
                    
                    (c
                    )
                    
                    707Other
                        expense (income)
                    
                    
                    7
                    
                    
                    (7
                    )
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -Income
                        (loss) from continuing operations beforeincome
                        tax benefit (expense)
                    
                    
                    2,086
                    
                    
                    (2,356
                    )
                    
                    
                    
                    
                    (270
                    )
                    
                    (3,080
                    )
                    
                    164
                    
                    
                    
                    
                    
                    (3,186
                    )Income
                        tax benefit (expense)
                    
                    
                    (352
                    )
                    
                    352
                    
                    
                    
                    
                    
                    -
                    
                    
                    393
                    
                    
                    -
                    
                    
                    
                    
                    
                    393Net
                        income (loss)
                    
                    $
                    1,734
                    
                    $
                    (2,004
                    )
                    
                    
                    
                    $
                    (270
                    )
                    $
                    (2,687
                    )
                    $
                    164
                    
                    
                    
                    
                    $
                    (2,793
                    )Basic
                        and fully diluted income (loss) per share
                    
                    
                    N/A
                    
                    
                    N/A
                    
                    
                    
                    
                    
                    N/A
                    
                    $
                    (0.09
                    )
                    $
                    0.08
                    
                    
                    
                    
                    $
                    (0.09
                    )-Weighted-average
                        number of shares used in computingbasic
                        and fully diluted loss per share amounts
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    28,747,582
                    
                    
                    1,971,504
                    
                    
                    
                    
                    
                    30,719,086
 
 **Notes
        to unaudited pro forma consolidated statement of
        operations**
  **For
        the Three Months Ended March 31, 2005 and 2004**
 
 (1)
              
              Reflects
                  adjustments to back out certain revenues and expenses historically
                  recorded or incurred by Aventis PR which related to operations
                  not
                  acquired by Inyx USA. a. Aventis
                  PR’s revenue represents all manufacturing revenues relating to the
                  carved-out business of Aventis PR and was derived using the actual
                  product
                  volumes of the products acquired in the acquisition on March 31,
                  2005,
                  extended at the newly negotiated unit prices for each one of these
                  products.(2)
              
              Reflects
                the following pro forma adjustments:
   a.
              Depreciation
                  expense was adjusted to reflect the fair value of assets acquired
                  as of
                  the closing of the acquisition on March 31, 2005, based on valuations
                  provided by a third
                  party.
 
 b.
                Amortization
                    of intangible assets was recorded to reflect the amortization
                    of purchased
                    intangible assets subject to amortization including contract
renewals
                    and customer relationships acquired in the acquisition on March
                    31, 2005,
                    based on valuations provided by a third
                    party.
 
 c.
                Reflects
                    additional interest expense from the new Westernbank credit facility
                    closed on March 31, 2005 and a reduction of interest expense
                    due to the
                    repayment of the Laurus Master Funds credit facility also on
                    March 31,
                    2005.
  14
  **Item
        2.** **** **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**
  **Forward
        Looking Statements**
  Statements
        that are not historical facts included in this report are “forward-looking
        statements” within the meaning of the Private Securities Litigation Reform Act
        of 1995 that involve risks and uncertainties that could cause actual results
        to
        differ from projected results. Such statements address activities, events
        or
        developments that the Company expects, believes, projects, intends or
        anticipates will or may occur, including such matters as future capital,
        business strategies, expansion and growth of the Company’s operations, cash
        flow, marketing of products and services, and development of new products
        and
        services. Factors that could cause actual results to differ materially
        (“Cautionary Disclosures”) are described throughout this report. Cautionary
        Disclosures include, among others: general economic conditions, the markets
        for
        and market price of the Company’s products and services, the Company’s ability
        to find, acquire, market, develop and produce new products and services,
        the
        strength and financial resources of the Company’s competitors, the Company’s
        ability to find and retain skilled personnel, labor relations, availability
        and
        cost of material and equipment, the results of financing efforts, and regulatory
        developments and compliance. All written and oral forward-looking statements
        attributable to the Company are expressly qualified in their entirety by
        the
        Cautionary Disclosures. The Company disclaims any obligation to update or
        revise
        any forward-looking statement to reflect events or circumstances occurring
        hereafter or to reflect the occurrence of anticipated or unanticipated
        events.
  **General**
  Inyx,
        Inc. (“Inyx”, “we”, “us”, “our”, or the “Company”) through its wholly-owned
        subsidiaries, Inyx Pharma Limited (“Inyx Pharma”), Inyx Canada Inc. (“Inyx
        Canada”), and Inyx USA Ltd. (“Inyx USA”) is a specialty pharmaceutical company.
        We focus our expertise on the development and manufacturing of prescription
        and
        over-the-counter (“OTC”) aerosol pharmaceutical products and drug delivery
        technologies for the treatment of respiratory, allergy, cardiovascular,
        dermatological and topical conditions. Our client base primarily consists
        of
        ethical pharmaceutical corporations, branded generic pharmaceutical distributors
        and biotechnology companies. Although we perform some sales and marketing
        functions, we have limited product distribution capabilities and so we depend
        on
        our customers’ distribution channels or strategic partners to market and sell
        the pharmaceutical products we develop and manufacture for them.
  On
        March
        29, 2005, the Company has incorporated a wholly-owned subsidiary, Exaeris
        Inc.,
        (“Exaeris”) a Delaware Corporation to manage and operate its contemplated
        product development and marketing activities. As of the date of this report,
        Exaeris had no active operations and is currently dormant.
  In
        May  2005, the Company has incorporated a wholly-owned subsidiary,
        Inyx
        Europe Limited (“Inyx Europe”) under the laws of England and Wales, to
        pursue strategic and business development activities.
 
 15
  **The
        Aventis PR Transaction**
  On
        March
        31, 2005, through our wholly-owned subsidiary, Inyx USA, we acquired the
        business assets of Aventis PR from Aventis Pharmaceuticals, Inc. (“Aventis
        Pharmaceuticals”) a subsidiary of Aventis Pharmaceuticals, part of the  the
        sanofi-aventis group, for approximately $22.7 million, including incremental
        transaction costs of $2.6 million. Aventis PR is a pharmaceutical manufacturing
        operation producing dermatological, respiratory and allergy products. Aventis
        PR
        manufactured pharmaceutical products in accordance with a contract manufacturing
        agreement with its parent company, Aventis Pharmaceuticals.
  **Consolidated
        Results**
  The
        accompanying consolidated financial information includes the accounts of
        Inyx
        and its wholly-owned subsidiaries, Inyx Pharma Limited, incorporated under
        the
        laws of England and Wales; Inyx Canada, Inc., formed as a federally incorporated
        Canadian corporation; Inyx USA, Ltd., incorporated under the laws of Isle
        of
        Man; and Inyx Realty, Inc. (“Inyx Realty”), a Florida corporation owned by the
        Company through April 14, 2004. All intercompany accounts and transactions
        have
        been eliminated in consolidation.
  **For
        the Three Months Ended March 31, 2005 and 2004**
  The
        financial information set forth in the following discussion should be read
        in
        conjunction with and qualified in its entirety by the financial statements
        of
        our Company presented elsewhere herein.
  **NET
        REVENUES**
 Our
          revenues are derived from pharmaceutical manufacturing and product formulation
          and development outsourcing services, including product stability, commercial
          scale-up, and validation and regulatory support for our clients’ products.
          Future contract revenues are dependant upon our clients maintaining or
          obtaining
          regulatory approval for the sale of their products in their designated
          markets.
  Although
          we do not currently derive any of our revenues from the sale of our own
          products, we believe that we can increase our revenues and achieve greater
          margins through the addition of our own product lines in selected pharmaceutical
          market sectors, with marketing to be conducted through certain strategic
          customers. We expect that these types of revenues would include direct
          sales,
          royalty payments and licensing fees of our planned products. At this time,
          we
          have not commercialized any of our own proprietary products and we have
          no
          agreements for such fees or distribution agreements finalized.
  Net
          revenues for the three months ended March 31, 2005 were approximately $2.7
          million as compared to net revenues of approximately $4.5 million for the
          three
          months ended March 31, 2004. Net revenues decreased by $1.8 million or
          approximately 41% for the comparative three months. Net revenues for the
          three
          months ended March 31, 2005 were impacted by several factors. There
          were
          product quality issues with one of our major can suppliers during the month
          of
          January that have led to a delay in the supply of cans required by a number
          of
          our key customers in the saline, hydrocarbon and oral spray product areas.
          As a
          result of the delay of the supply of products to these customers, approximately
          $2.0 million in anticipated first quarter revenues have been delayed
          into
          the third quarter this year. The quality issues with our can supplier have
          now
          been rectified by that vendor. In addition, there were delays in two major
          client contracts originally expected to respectively, start at the beginning
          of
          2005 which did not commence because these clients did not receive
          their
          required product regulatory approvals as anticipated. These delayed contracts
          are now scheduled to start production in the third and fourth quarters
          of
          2005, respectively. We expect these contracts to create approximately $4
          million
          in revenues in the second half of the year.
  For
          the
          three months ended March 31, 2005, our three top customers accounted for
          approximately $1.4 million or approximately 51% of our total net revenues.
          During this period, these three customers were Generics UK, accounting
          for
          approximately $662,000 in net revenues or approximately 25% of total revenues;
          Laboratoria Aldo-Union, accounting for approximately $357,000 in net revenues
          or
          approximately 13% of total revenues; and Advanced Medical Optics, Inc.
          accounting for approximately $350,000 in net revenue or approximately 13%
          of
          total revenues.
 16
  For
          the
          three months ended March 31, 2004, our three largest customers accounted
          for
          approximately $2.6 million in net revenues or approximately 58% of total
          net
          revenues. During the three months ended March 31, 2004, our top three customers
          were the Merck Generics, accounting for approximately $1.6 million in net
          revenues or approximately 35% of total net revenues; Genpharm, accounting
          for
          approximately $661,000 in net revenues or approximately 15% of total net
          revenues; and SSL, accounting for approximately $422,000 in net revenues
          or
          approximately 9% of total net revenues. These customers were affected by
          the
          noted component quality issues during the three months ended March 31,
          2005.
  As noted
          above, a delay in the production for any one of our top three clients or
          the
          loss of any such client would have a material adverse affect on our revenues
          and
          profitability opportunities. As part of our strategic growth objectives,
          we
          continue to broaden our customer base and distribution channels to mitigate
          the
          risk of our economic dependence on any one client.
  In
          addition, as a result of our acquisition of Aventis PR on March 31, 2005,
          we
          have broadened our business base including adding a number of new clients.
          These
          include Kos Pharmaceuticals, Inc., that we expect will be our largest client,
          and sanofi-aventis that we expect will still have production requirements
          from
          the Puerto Rico manufacturing site we acquired from them.
  Also,
          we
          believe our expertise in converting from CFC to CFC-free aerosol
          pharmaceuticals, particularly the production of hydrolfuoroalkane (“HFA”)
          non-ozone-depleting aerosol pharmaceutical products, should generate increasing
          business as the Montreal Protocol continues to be implemented around the
          world.
  **COST
          OF GOODS SOLD**
  Cost
          of
          goods sold is associated with manufacturing and development revenues and
          includes materials, labor, factory overheads and technical affairs, including
          quality control and quality assurance regulatory support functions.
  Cost
          of
          sales for the three months ended March 31, 2005 amounted to approximately
          $2.5
          million or approximately 95% of net revenues. In
          comparison, for the three months ended March 31, 2004, cost
          of
          goods sold amounted to approximately $3.9 million, or approximately 86%
          of net
          revenues of $4.5 million.
  The
          cost
          of goods sold as a percentage of revenues is consistently high in the
          comparative periods due to the following factors:
  (1)
            A
            lower than required manufacturing capacity utilization has continued
            into 2005
            as it has taken us time during 2005 to start-up two major client projects
            due to
            their own required regulatory approvals for new CFC-free (or HFA) metered
            dose
            inhaler products to be distributed in Europe, and the normal production
            commissioning and validation processes involved in the pharmaceutical
            manufacturing industry. We expect our cost of goods sold to be reduced
            as these
            projects are ramped up to full production by the end of 2005. With more
            volume
            throughput at our manufacturing facility, we can absorb more overhead
            costs and
            therefore reduce our manufacturing costs.
 (2)
          The
          noted delay in the supply of cans from a key vendor in the first quarter
          of
          2005, has led to less than expected manufacturing capacity utilization
          which has
          led to less overhead absorption and a concomitant increase in cost of goods
          sold.
 17
  Even
          though we have experienced moderate raw material and labor price increases
          since
          our reverse acquisition of Inyx Pharma, due to inflation and new vendor
          relationships, we expect the cost of goods sold percentage to be maintained
          or
          reduced as more customer contracts are initiated or renewed, and our capacity
          utilization is enhanced. With improved fixed overhead cost absorption,
          we expect
          to improve our profit margins.
  **GROSS
          PROFIT**
  Gross
        profit for the three months ended March 31, 2005 amounted to approximately
        $142,000 on net revenues of $2.7 million or approximately 5% of net revenues. In
        comparison, gross profit for the three months ended March 31, 2004 amounted
        to
        approximately $615,000 on net revenues of approximately $4.5 million or
        approximately 14% of net revenues.
  We
          believe that our gross profit will improve with the additional volume and
          a more
          favorable product mix later this year and that we can also improve our
          gross
          profit margins through the addition of our own pharmaceutical product lines,
          which offer greater profit margins than those provided by contract manufacturing
          services. Although we do not currently derive any revenues from the sale
          of our
          own products, we believe that our first proprietary product may be ready
          for
          commercial marketing by late 2005.
  **OPERATING
        EXPENSES**
  Our
        operating expenses consist of product research and development costs, general
        and administrative, selling, depreciation and amortization, as well as
        amortization of intangible assets expenses as compared to the same period
        in
        2004.
  Operating
        expenses for the three months ended March 31, 2005 amounted to approximately
        $2.5 or approximately 95% of net revenues of $2.7 million. In comparison,
        operating expenses for the three months ended March 31, 2004 amounted to
        approximately $2.7 million or approximately 59% of net revenues of $4.5 million.
  The
        largest decrease to our operating expenses for the three months ended March
        31,
        2005 was a result of lower general and administrative expenses as compared
        to
        the same period in 2004.
  **Research
        and Development Costs**
  Research
        and development costs for the three months ended March 31, 2005 were
        approximately $357,000 or approximately 14% of our operating expenses and
        13% of
        our net revenues. In comparison, research and development costs for the three
        months ended March 31, 2004 were approximately $287,000 or 11% of our operating
        expenses and 6% of our net revenues.
  As
        part
        of our strategy to evolve into a specialty pharmaceutical company with its
        own
        proprietary products, we have started to incur research and development costs
        as
        part of our operating expenses. These costs include intellectual property
        development costs, salaries for required technical staff, fees to consultants
        and costs associated with the use of external laboratory facilities as may
        be
        required. We believe that even though research and development costs may
        increase our operating expenses in the short term; in the long term, these
        costs
        should be offset by the higher profit margins derived from the manufacturing
        and
        sale of our own proprietary products as compared to the operating margins
        of our
        contract manufacturing services. We plan to distribute our proprietary products
        through our own customers’ distribution channels or in collaboration with other
        strategic marketing partners.
  We
        are
        focusing our research and development efforts on inhalation-therapy drug
        delivery devices and methods, and generic prescription and over-the-counter
        aerosol pharmaceutical products for respiratory, dermatological and topical,
        and
        cardiovascular applications. We also believe that we can enhance our competitive
        position through the acquisition of regulatory-approved pharmaceutical products
        and drug delivery devices for respiratory, dermatological, topical and
        cardiovascular medication applications or such products in development,
        including those through the acquisition of other pharmaceutical companies.
        As
        noted above, one such example is our recent acquisition of a lipid-binding
        matrix for delivering incompatible or unstable drug substances. We plan to
        use
        this technology to develop our own proprietary metered dose inhalers (“MDIs”)
        for the treatment of asthma and other respiratory diseases, as well as across
        a
        broad-spectrum of other inhalation-therapy treatments including acute and
        chronic pain management.
  18
 At
        this
        time, we have not commercialized any of our own proprietary products although
        we
        do have a number of aerosol pharmaceutical products already under development
        or
        in late planning stages. These consist of single molecule and combination
        HFA
        respiratory inhalants, non-CFC propelled oral sprays for cardiovascular
        ailments, wound irrigation and cleansing sprays utilizing novel barrier
        technologies, and anti-inflammatory nasal pumps. Our initial two proprietary
        products, a wound-care spray and an anti-inflammatory nasal pump, are expected
        to be ready for commercial marketing in late 2005.
  **General
        and Administrative Expenses**
  Our
        general and administrative expenses include corporate overhead costs,
        administrative support, business and corporate development as well as support
        costs incurred by our wholly owned subsidiaries.
  General
        and administrative expenses amounted to approximately $1.9 million or 69%
        of net
        revenues of $2.7 million for the three months ended March 31, 2005 compared
        to
        general and administrative expenses of approximately $2.1 million or
        approximately 46% of net revenues of $4.5 million for the three months ended
        March 31, 2004.
  The
        general and administrative expenses for the three month ended March 31, 2005
        included costs related to the acquisition of Aventis PR amounting to
        approximately $300,000. These costs were offset by lower insurance, legal
        and
        consulting costs of approximately $170,000, lower investor relations and
        communications costs of approximately $72,000 and an increase in the foreign
        exchange gain of approximately $140,000.
  As
        we
        continue to implement our corporate development and growth strategy, we expect
        to incur additional administrative costs due to the addition of senior business
        and financial executives to our management team. We believe that as we grow
        our
        business and begin to introduce our own proprietary products, that
        we
        believe will have better margins than the contract development and manufacturing
        fees that we presently receive from our customers, we can offset these
        administrative incremental costs on a long-term basis.
  **Selling
        Expenses**
  Selling
        expenses consists primarily of salaries, commissions and marketing costs
        associated with the commercial, and sales and marketing arm of our business.
        Although we perform some sales and marketing functions, presently such
        activities are primarily focused on expanding our pharmaceutical aerosol
        manufacturing business with existing or potential clients.
  Selling
        expenses were approximately $134,000 or approximately 5% of net revenues
        of $2.7
        million for the three months ended March 31, 2005 compared to $84,000 or
        approximately 2% of net revenues of approximately $4.5 million for the three
        months ended March 31, 2004.
  Although
        we continue to expand our own proprietary product development programs, we
        have
        not yet commercialized or marketed our own products or drug delivery
        applications. Therefore, our selling expenses have remained consistent over
        the
        comparative periods. Since our reverse acquisition of Inyx Pharma, our sales
        and
        marketing functions have been primarily focused on expanding our pharmaceutical
        aerosol manufacturing business with existing or potential clients. As we
        continue to ramp-up our business development and commercial activities, we
        expect our selling expenses to increase concomitantly with expected revenue
        expansion.
  19
 Our
        selling expenses as a percentage of our revenues will also increase as we
        are
        planning to add senior sales and marketing executives to assist in our business
        expansion, including intensifying our marketing activities to existing or
        potential customers.
  We
        believe that once we commence marketing our own proprietary products, we
        may
        also need to build or contract our own sales force. We expect to incur
        substantial additional selling expenses once we undertake these types of
        commercial activities. Initially though, until we can adequately afford the
        cost
        of building or contracting our own sales force, we will depend on our customers’
        distribution channels or strategic partners to market and sell the
        pharmaceutical products that we are presently developing or planning to develop.
  **Depreciation
        and Amortization**
  The
        value
        of our property, plant and equipment is stated at cost. Depreciation is computed
        using the straight-line method based on the estimated useful lives of the
        assets, which range from 25 years for buildings and 3-10 years for equipment.
  Depreciation
        and amortization expenses were approximately $161,000 or 6% of net revenues
        of
        $2.7 million for the three months ended March 31, 2005 compared $152,000
        or 3%
        of net revenues of approximately $4.5 million for the three months ended
        March
        31, 2004.
  **Amortization
        of Intangible Assets**
  The
        fair
        values assigned to the intangible assets acquired are based on estimates
        and
        assumptions provided and other information compiled by management, including
        independent valuations, that utilize established valuation techniques
        appropriate for the industry in which the Company
        operates.
  The
        amortization expenses for intangible assets for the three months ended March
        31,
        2005 was approximately $47,000 compared to $42,000 for the three months ended
        March 31, 2004.
  Our
        amortization expenses for intangible assets relates to the Company’s purchased
        intangible assets related to the Inyx Pharma acquisition of Miza UK’s assets;
        the intangible assets include Miza UK’s customer list and know-how as well as a
        technology patent acquired in late 2004. The customer list is amortized over
        a
        period of 12 years, know-how is amortized over 10 years and the patent is
        amortized over 7 years. These
        intangible assets are amortized on a straight line basis over their estimated
        remaining useful lives in proportion to the underlying cash flows that were
        used
        in determining the acquired value.
  The
        newly
        acquired intangible assets relating to the acquisition of Aventis PR will
        be
        amortized from the date of acquisition. The intangible asset which represents
        the value assigned to customer contracts will be amortized on a straight
        line
        basis over three years. The intangible asset which represents the value assigned
        to customer relationships will be amortized using the declining balance method
        of accelerated amortization over ten years.
  **OPERATING
        LOSS BEFORE INTEREST AND FINANCING COSTS AND INCOME TAX
        BENEFIT**
  Loss
        from
        operations before interest and financing costs and income tax benefit amounted
        to approximately $2.4 million for the three months ended March 31, 2005 compared
        to a loss of $2.1 million for the three months ended March 31,
        2004.
  The
        primary reason for the operating loss for the three months ended March 31,
        2005
        as compared to the same period in 2004 was due to lower gross profit related
        to
        lower production volumes due to delays in customer start dates, resulting
        in
        higher unabsorbed overhead costs.
  **INTEREST
        AND FINANCING COSTS**
  Interest
        and financing costs consist of interest expense related to the long term
        debt as
        well as the amortization of the financing charges and the amortization of
        the
        debt discount associated with the fair value of the warrants issued and the
        beneficial conversion feature related to the financings with Laurus Master
        Fund,
        Ltd. (“Laurus Funds”).
  20
 For
        the
        three months ended March 31, 2005, interest and financing costs totaled
        approximately $4.6 million or 170% of net revenues of $2.7 million compared
        to
        interest and financing costs of approximately $1.0 million or 23% of net
        revenues of $4.5 million for the three months ended March 31, 2004.
  The
        increase in interest and financing costs for the three months ended March
        31,
        2005 was attributable to the refinancing of the Laurus Funds convertible
        debt.
        As a result of the refinancing on March 31, 2005, we accelerated the recognition
        of the unamortized deferred charges of approximately $651,000 and unamortized
        debt discount of approximately $1.4 million and incurred approximately $1.6
        million as a fee for early repayment. Laurus Funds was also issued
        300,000
        stock purchase warrants with a fair value of approximately $162,000 as
        compensation for a waiver received waiving any Events of Default that may
        occur
        under the convertible debt due October 29, 2006 and the revolving facility
        due
        December 30, 2006. Both of these instruments were refinanced on March 31,
        2005
        through Westernbank and Laurus Funds was paid in full.
  Additionally,
        for the three months ended March 31, 2005, the Company accrued
        approximately $465,000 in fees related to its 2004 equity financing
        activities.
  In
        addition, for the three months ended March 31, 2005, interest expense included
        interest related to Laurus Funds, Stiefel Laboratories, Inc. (“Stiefel”) and
        various other stockholders amounted to approximately
        $324,000.
  For
        the
        three months ended March 31, 2004, interest and financing costs were
        approximately $1.0 million or approximately 23% of net revenues of approximately
        $4.5 million. The interest and financing costs included approximately $589,000
        for the beneficial conversion feature on the additional debt issued during
        the
        three month period, $142,000 in amortization of debt discount related to
        the
        convertible debt to Laurus Funds, approximately $77,000 in amortization of
        deferred financing charges, approximately $218,000 in interest expense for
        the
        notes payable to Laurus Funds, and a convertible promissory note payable
        to
        Stiefel. In March of 2004, we received a waiver from Stiefel on the annual
        interest payment due to them amounting to approximately $240,000 in
        consideration for future product development services.
  **INCOME
        TAX BENEFIT**
  We
        did
        not record any provisions for United States federal or foreign taxes that
        may
        result from future remittances of undistributed earnings of foreign
        subsidiaries, because it is expected that such earnings will be permanently
        reinvested in our foreign operations.
  **NET
        LOSS**
 The
          net
          loss for the three months ended March 31, 2005 was approximately $7 million
          or
          approximately 260% of net revenues of $2.7 million  compared to
          a net loss
          of $2.7 million or approximately 60% of net revenues of $4.5 million for
          the
          three months ended March 31, 2004.
  The
          net
          loss for the three months ended March 31, 2005 was primarily attributed
          to the
          early repayment of the Laurus Funds convertible debt, associated termination
          fees and interest costs, and the lower than expected production
          levels at
          our Inyx Pharma operation. In comparison, the net loss for the three months
          ended March 31, 2004 was the result of low manufacturing capacity utilization
          due to delayed project implementation. We expect the utilization to improve
          as
          more of these projects ramp up to full production and new projects are
          added.
  As
          we
          continue to ramp-up our business and obtain new contracts and purchase
          orders
          from existing and new customers, we believe that we can achieve profitability
          and have positive cash flows from the operations we acquired, once we fully
          integrate and develop our current and newly acquired business and establish
          ourselves as a specialty pharmaceutical company.
 21
 
  In
            addition, as a result of our acquisition of Aventis PR on March 31, 2005,
            we
            have broadened our business base including adding a number of new clients.
            These
            include Kos Pharmaceuticals, Inc., that we expect will be our largest
            client,
            and sanofi-aventis that we expect will still have production requirements
            from
            the Puerto Rico manufacturing site we acquired from them. We expect our
            profitability opportunities to improve with a more favourable product
            mix.
  **LIQUIDITY
        AND CAPITAL RESOURCES**
  **General**
  We
        are
        financing our operations primarily through credit facilities, revenues from
        multi-year contract manufacturing and product development contracts and purchase
        orders, sale of equity securities, stockholder loans and capital lease
        financing.
  As
        of
        March 31, 2005, we had approximately $51.7 million in contractual obligations
        that are due through 2019. These financial obligations include both short-term
        and long-term debt interest and principal repayments, and amounts owed for
        operating leases.
  As
        of
        March 31, 2005, our current assets, including cash and cash equivalents,
        accounts receivable, inventory and other current assets amounted to
        approximately $8.9 million. Current liabilities amounted to approximately
        $20.1
        million and include approximately $7.6 million in accounts payable and other
        current liabilities, $3.5 million in deferred revenues and approximately
        $9
        million for the current portion of our long-term debt obligations which includes
        approximately $2.4 million on the revolving line of credit, and $4 million
        due
        to Stiefel which was refinanced subsequent to the period end and therefore
        has
        been classified as a current liability.
  As
        an
        emerging specialty pharmaceutical company, we are involved in a number of
        business development projects, including research and development activities,
        that require the use of capital resources over extended periods of time.
        From
        time to time, these activities may also include the use of external resources
        that require prepayment or cash deposits for supplies, products or services
        that
        we require. As we intensify the development of our own proprietary products,
        our
        capital requirements may increase accordingly. The profit margins on our
        proprietary products and consulting services are expected to be higher than
        our
        contract manufacturing services, although the time line for the commencement
        of
        revenues and earnings from these newly evolving business activities may be
        longer than that of our established contract manufacturing operations.
  We
        also
        continue to incur operating losses since our reverse acquisition of Inyx
        Pharma
        on April 28, 2003. For the three months ended March 31, 2005, such losses
        amounted to approximately $7 million. These losses are primarily as a result
        of
        low gross profit margins due to the underutilization of our manufacturing
        capacity, research and development costs as we continue the development of
        our
        own proprietary pharmaceutical products, interest and financing costs, and
        a
        number of business and corporate development costs including added payroll
        expenses, and external consulting costs and fees associated with our efforts
        to
        grow our Company and evolve into an integrated pharmaceutical company.
  In
        2005,
        we believe that we can achieve profitability by continuing to intensify our
        sales and marketing efforts to increase the number of customer purchase orders
        and contracts for our contract development and manufacturing services. As
        noted
        above, we also believe that we can establish new sources of revenue by providing
        pharmaceutical consulting services to the industry, and by marketing our
        own
        proprietary pharmaceutical products. Based on pharmaceutical industry profit
        margins for proprietary products, we expect that the successful development
        and
        manufacturing of our own proprietary products will provide us with greater
        operating margins and improve our performance and overall profitability
        opportunities.
  22
 Until
        that time, we will continue to depend on our credit facilities, and placements
        of equity and debt securities, to assist us with our working capital
        requirements and to continue implementing our business development strategies,
        capital expenditure plans, and proprietary product development and
        commercialization initiatives.
  **Capital
        Resources**
  On
        March
        31, 2005 the Company obtained a new non-dilutive asset based secured credit
        facility from Westernbank Puerto Rico totaling $46 million. The facility
        is
        comprised of a revolving loan (the “Revolver”) of up to $10 million for purposes
        of working capital, a series of three term loans (Term loan “A”, “B” and “C”)
        amounting in aggregate to up to $31 million for purpose of refinancing the
        indebtedness to Laurus Funds and purchasing the assets of Aventis PR, and
        a
        mezzanine loan (Term loan “D”) of up to $5 million for the purpose of funding
        construction or new equipment. The revolver is secured by the eligible
        receivables and inventory. The term notes are collateralized by substantially
        all the property of the Company and its subsidiaries whether now owned or
        thereafter to be acquired. Interest is based on Westernbank’s prime
        rate.
  The
        amounts drawn on the above credit facility on the date of closing were used
        to
        pay $19.7 million for the acquisition of the assets of Aventis PR, approximately
        $12.3 million was used to refinance the indebtedness due to Laurus funds,
        approximately $681,000 was used to pay for various acquisition transaction
        related costs and approximately $643,000 for financing costs .
  The
        revolver has a three year term and bears interest at the Westernbank prime
        rate
        plus 1.0%. The availability on the Revolver is based on a percentage of our
        accounts receivable, unbilled finished good inventory and raw and in-process
        inventory. The first three term loans bear interest at the Westernbank prime
        rate plus 2.0% payable monthly, with monthly principle repayments
        commencing on July 1, 2005 through maturity. The mezzanine term loan bears
        interest at the rate of 15.0% with monthly principal payments commencing
        on July
        1, 2005 through maturity.
  In
        connection with the Company's repayment of the $12.3 million Credit Facility
        with Laurus Funds, all of the liens and security interest in the assets of
        Inyx
        Pharma, Ltd held by Laurus Funds were unconditionally released and transferred
        to Westernbank Puerto Rico pursuant to the Release Agreement dated March
        31,
        2005.
  On
        March
        31, 2005, the Company received a $3.5 million advance from Aventis PR for
        strategic and business development activities to be carried out by the Company
        during 2005. This amount was recorded as deferred revenues on the Company’s
        consolidated balance sheet and will be recognized into income as revenue
        is
        earned.
  We
        expect
        to meet our short term liquidity requirements through net cash provided by
        operations and borrowings under the Debt Agreement with Westernbank. We believe
        that this source of cash will be sufficient to meet the Company’s operating
        needs and planned capital expenditures for at least the next twelve
        months.
 
 **Analysis
        of Cash Flows**
  **For
        the Three Months Ended March 31, 2005 and 2004**
  At
        March
        31, 2005, we had cash of approximately $3.3 million as compared to cash of
        $753,000 at March 31, 2004.
  Cash
        Flows from Operating Activities for the Three
        Months Ended March 31, 2005
  The
        net
        cash generated by operating activities for three months ended March 31, 2005
        was
        approximately $4.0 million compared to cash utilization of approximately
        $3.2
        million for the three months ended March 31, 2004.
  23
 For
        the
        three months ended March 31, 2005, the net cash generated in operating
        activities included a net loss of $7 million adjusted for non-cash charges
        totaling $4.2 million consisting primarily of $2.1 million of amortization
        of
        financing cost and debt discounts, $1.6 million due to the issuance of equity
        securities as compensation of interest and penalties to Laurus Funds, and
        $0.2
        million of depreciation and amortization, an additional $64,000 provision
        for
        inventory obsolescence and $90,000 of all other changes. Working Capital
        changes
        generated a net $7 million with uses generated by reductions to prepaid and
        increased inventories offset by an increase in accounts payable and accrued
        liabilities as well as $3.5 million in deferred revenues attributable to
        business development activities with sanofi-aventis, and a decrease in accounts
        receivable.
  The
        net
        cash used in operating activities for the three months ended March 31, 2004
        amounted to approximately $3.1 million. Our net cash used in operations was
        primarily the result of a $2.7 million net loss from continuing operations
        of
        the business, adjusted by non-cash charges including depreciation and
        amortization of approximately $1.1 million, a reserve for bad debts and obsolete
        inventory amounting to approximately $450,000, and net securities issuance
        costs
        of approximately $430,000. These non-cash charges were offset by a deferred
        income tax asset of approximately $390,000, consisting of a net operating
        loss
        carried forward. Working capital changes reducing cash flow from operations
        were
        due to increases to our inventory amounting to approximately $210,000, and
        an
        increase to our prepaid deposits and other current assets amounting to
        approximately $1.3 million, resulting from increasing new sales and business
        development activities. Working capital changes increasing cash flow from
        operations were due primarily to a decrease of accounts receivable of
        approximately $200,000, an increase in accounts payable and accrued liabilities
        of approximately $135,000 and a decrease in deferred revenue totaling
        approximately $190,000.
  Cash
        Flows from Investing Activities for the Three Months Ended March 31,
        2005
  The
        net
        cash used in investing activities for the three months ended March 31, 2005
        amounted to approximately $22.9 million compared to approximately 58,000
        for the
        comparative period in 2004.
  For
        the
        three months ended March 31, 2005, $22.7 million of the capital expenditures
        related to property, plant and equipment as well as purchased intangibles
        acquired by Inyx USA in the Aventis PR transaction completed on March 31,
        2005
        and approximately $120,000 related to construction in progress costs in
        preparation for a new customer contract to be serviced from our newly acquired
        Puerto Rico plant.
  For
        the
        three months ended March 31, 2004, we spent approximately $58,000 on the
        acquisition of office equipment and computers.
  Cash
        Flows from Financing Activities for the Period Ended December 31,
        2004
  For
        the
        three months ended March 31, 2005, the net cash provided by financing activities
        approximated $21.7 million compared to approximately $3.2 million for the
        three
        months ended March 31, 2004.
  The
        proceeds for the three months ended March 31, 2005 included $34 million from
        the
        issuance of debt compared to $3.2 million for the three months ended March
        31,
        2004. The borrowings were offset by the repayment of short-term and long-term
        debt and financing fees totaling approximately $12.5 million for the three
        months ended March 31, 2005 and 34,000 for the three months ended March 31,
        2004.
  **External
        Sources of Liquidity**
  Financing
        Activities
  On
        March
        31, 2005 the Company obtained a new non-dilutive asset based secured credit
        facility from Westernbank totaling $46 million. On March 31, 2005, we drew
        approximately $33.4 million under the facility. The facility is comprised
        of a
        Revolving loan of up to $10 million for purposes of working capital, a series
        of
        three term loans amounting in aggregate to up to $31 million for purposes
        of
        refinancing the indebtedness to Laurus Funds and purchasing the assets of
        Aventis PR, and a Mezzanine loan of up to $5 million of purposes of funding
        construction or new equipment. The facility is collateralized by all the
        property of the Company and its subsidiaries whether now owned or acquired
        hereafter.
  24
 As
        of
        March 31, 2005, we have availability of $7.6 million under the revolver and
        $5
        million under the term loan A for capital expenditures.
  The
        revolver has a three year term and bears interest at the Westernbank prime
        rate
        plus 1.0%. The availability on the Revolver is based on a percentage of our
        accounts receivable, unbilled finished good inventory and raw and in-process
        inventory. The first three term loans bear interest at the Westernbank prime
        rate plus 2.0% with monthly repayments commencing on July 1, 2005 through
        maturity. The mezzanine term loan bears interest at the rate of 15.0% with
        monthly principal payments commencing on July 1, 2005 through maturity.
  In
        connection with the Company's repayment of the $12.3 million Credit Facility
        with the Laurus Funds, all of the liens and security interest in the assets
        of
        Inyx Pharma, Ltd held by Laurus Funds were unconditionally released and
        transferred to Westernbank Puerto Rico pursuant to the Release Agreement
        dated
        March 31, 2005.
  Certain
        Indebtedness and Other Matters
  Inyx
        Pharma had received a working capital credit facility in the form of an
        unsecured convertible debt instrument (the “Stiefel Loan”) from one of its
        customers, Stiefel Laboratories, Inc. (“Stiefel”). Headquartered in Coral
        Gables, Florida, Stiefel is a privately held pharmaceutical company which
        has a
        number of domestic and international operations.
  The
        principal amount of the Stiefel Loan is approximately $4 million, and was
        due on
        March 6, 2007, however was renewed by the Company on April 6, 2005. The new
        terms on the Stiefel Loan include the repayment of the entire loan in three
        equal installments starting on June 30, 2005 and the termination of its Option
        to convert their debt into 4 million shares of the Company’s stock. Furthermore,
        once the note is paid off, the cross default condition on the Manufacturing
        and
        Supply Agreement dated March 6, 2003, will be removed and a cancellation
        letter
        will be issued on December 31, 2005. As
        of
        March 31, 2005, the outstanding amount owed under the Stiefel Loan totaled
        approximately $4.2 million in principal and interest.
 The
          Company approached Stiefel in June 2005 with a request to restructure the
          payments under its 6% uncollateralized Promissory Note to Stiefel. In the
          course
          of such discussions the Company did not make the first restructured note
          payment
          on June 30, 2005, and Stiefel demanded acceleration and repayment of the
          Note.
          The Company paid the June 30 installment in July 2005 and is
          continuing discussions with Stiefel regarding the payment terms
          of the
          balance of the note and other commercial matters between the parties, none
          of
          which have been finalized at this time.
  In
        addition to our credit facilities, as noted above, our Company’s stockholders
        have periodically advanced and received repayment of funds loaned to the
        Company. We have utilized such stockholder loans to support operations, settle
        outstanding trade accounts payable, and for general working capital purposes.
        Such loans are usually advanced on a short-term basis. As of March 31, 2005,
        the
        outstanding amount owned to such stockholders was approximately $642,000
        in
        principal and interest.
  As
        of
        March 31, 2005, we have capital lease obligations amounting to approximately
        $185,000 for two capital leases. These leases include computer equipment
        and
        copier. The major component of these capital lease costs is our new business
        information technology system, the Sage 500 Management Information System
        (Sage
        500 MIS), which has now become operational. The lease for the Sage 500 MIS
        will
        expire by 2006 and is guaranteed by our Chairman/CEO.
  For
        the
        three months ended March 31, 2005, interest and financing costs amounted
        to
        approximately $4.6 million, which included the write-off of deferred charges,
        debt discount, an early termination penalty and additional warrants issued
        to
        Laurus Funds totaling approximately $3.8 million and approximately
        $465,000
        in fees related to the Company's equity financing activities. The normalized
        interest expense for the period was approximately $324,000 for the notes
        payable
        to Laurus Funds, Stiefel, and the short-term loans obtained by the Company.
        The
        weighted average interest rate paid on the gross outstanding debt during
        the
        year was approximately 7.7%.
  In
        comparison, for three months ended March 31, 2004, the total amount of interest
        expensed on all of our Company’s borrowings amounted to approximately $1.0
        million. This amount of interest consisted of approximately $215,000 of interest
        paid and $811,000 of interest accrued. For the three months ended March 31,
        2004, the weighted average interest rate paid on gross outstanding debt during
        the year was approximately 6.7%.
  25
 Capital
        Expenditures
  For
        the
        three months ended March 31, 2005, the capital expenditures related primarily
        to
        the acquisition of tangible and intangible identifiable assets from Aventis
        PR,
        which was completed on March 31, 2005.
  On
        a
        short-term basis, recent equity financings and customer funding have provided
        us
        with sufficient capital to fund our immediate capital expenditure
        plans.
  Commencing
        in the second half of 2005, we will require an additional $5.0 million in
        funding over twenty four months for capital expenditures, in
        order to
        improve our pharmaceutical manufacturing technologies, production capabilities,
        and plant quality and safety systems so that we are able to pursue expanding
        commercial and product manufacturing opportunities with existing and potential
        multinational pharmaceutical and biotechnology clients. Our new credit facility
        with Westernbank provides for up to $5.0 million in funding new capital
        equipment purchases
  On
          a
          longer term basis, in order to continue to strengthen our position in the
          pharmaceutical aerosol sector, we will require further capital e xpenditures
          to enhance our aerosol manufacturing and quality control systems at our
          manufacturing facilities. We estimate that on a longer term basis we will
          require approximately $15 million over 5 years for such expenditures. These
          include expenditures for new filling and packaging equipment and
          production facility enhancements to improve our capabilities to introduce
          new
          pharmaceutical aerosol products for increasing market opportunities in
          the
          respiratory sector including dry powder inhaler manufacturing technology
          and
          isobutene filling capabilities . Planned investments will also be to support
          the
          maintenance of our facilities to meet ongoing regulatory compliance
          requirements, including adherence to good manufacturing practice, and the
          health, safety and environmental aspects of our pharmaceutical operations.
 Future
        Commitments
  As
        of
        March 31, 2005, we have commitments under various long-term lease agreements
        for
        premises including those for our office and development and production
        facilities. These property leases range from one to fifteen years depending
        on
        the specific property. We also have a number of operating and capital leases
        for
        office equipment, fork lifts and staff automobiles in the United Kingdom.
  As
        of
        March 31, 2005, we had operating lease contractual obligations totaling
        approximately **$** 2.6
        million due to various vendors over the next ten years.
  With
        regard to our vendor and suppliers, due to the purchase of the business assets
        of Miza UK out of Administration, we continue to be on pre-payments and cash
        on
        delivery (COD) payment terms with a number of our suppliers in Europe. These
        include all of our key component suppliers, including Cebal, which provides
        us
        with cans; Perfect Valois, which provides valves for aerosol pharmaceutical
        products; Lablabo, which provides actuators for steroidal foam products;
        Bespak,
        which provides valves for pharmaceutical respiratory inhaler devices; Precision
        Valve which provides us with aerosol valves; and Nussbaum & Guhl, which also
        provides us with cans.
  26
 As
        a
        specialty pharmaceutical company, we are also involved in a number of business
        development projects including research and development activities that require
        the use of capital resources over extended periods of time. From time to
        time,
        these activities may also include the use of external resources that require
        prepayment or cash deposits for supplies, products or services that we require.
        As we intensify the development of our own proprietary products, our capital
        requirements and/or future commitments may increase accordingly. The profit
        margins on our proprietary products and consulting services are expected
        to be
        higher than our contract manufacturing services, although the time line for
        the
        commencement of revenues and earnings from these newly evolving business
        activities may be longer than that of our established contract manufacturing
        operations.
  **Item
            3. Quantitative and qualitative Disclosure About Market
            Risk**
 In
              the
              ordinary course of our business we could be subjected to a variety
              of market
              risks, examples of which include, but are not limited to, interest
              rate
              movements as borrowings under our credit facilities bear interest based
              on prime
              rate and foreign currency fluctuations as we have operations in the
              United
              Kingdom. We continuously assess these risks and have established policies
              and
              procedures to protect against the adverse effects of these and other
              potential
              exposures. Although we do not anticipate any material losses in these
              risk
              areas, no assurance can be made that material losses will not be incurred
              in
              these areas in the future. We neither hold nor issue financial instruments
              for
              trading purpose.
  Interest
              Rate Risk. The carrying value of long-term debt at March 31, 2005,
              including
              current maturities approximated $31 million. A hypothetical
              1% increase in
              the prime interest rates applicable to our long-term debt at March
              31, 2005,
              would be approximately $217,000 or 9.5% of the carrying value.
  Foreign
              Exchange Rate Risk. Our functional currency is the U.S. Dollar, the
              financial
              statements of the Company’s operating subsidiaries with a functional currency
              other than U.S. dollars are translated into U.S. dollars using the
              current rate
              method. Accordingly, assets and liabilities are translated at period-end
              exchange rates while revenue and expenses are translated at the period’s average
              exchange rates. Adjustments resulting from these translations are accumulated
              and reported as a component of accumulated other comprehensive loss
              in
              stockholders’ equity. In 2004, more than 80% of our consolidated sales were
              realized in Great Britain pounds (including a Canadian customer), the
              balance of
              the consolidated sales were to customers in the European Union and
              realized in
              Euros. While we incur expenses in those currencies, the impact of these
              expenses
              does not fully offset the impact of currency exchange rates on our
              revenues. As
              a result, currency exchange rate movements can have a considerable
              impact on our
              earnings. For the three month period ended March 31, 2005 a hypothetical
              1%
              increase in the exchange rates between the British pound and the U.S.
              dollar
              would have an impact of approximately $27,000 or a 1.01% reduction
              to gross
              profits.
  We
              do not
              currently engage in any hedging activities designed to stabilize the
              risks of
              foreign currency fluctuations. However, we intend to implement hedging
              transactions in the future. Such fluctuations could adversely affect
              the value
              of our revenues and the results of our operations stated in U.S.
              Dollars.
 **Item
            4. Controls and Procedures**
 a)
                    Within
                        the 90-day period prior to the date of this report, we carried
                        out an
                        evaluation, under the supervision and with the participation
                        of our
                        management, including the Chief Executive Officer and Chief
                        Financial
                        Officer, of the effectiveness of the design and operation
                        of our
                        disclosure controls and procedures pursuant to Rule 13a-14
                        of the
                        Securities Exchange Act of 1934 (the "Exchange Act"). Based
                        upon that
                        evaluation, the Chief Executive officer and Chief Financial
                        Officer
                        concluded that our disclosure controls and procedures are
                        effective in
                        timely alerting them to material information relating to
                        the Company
                        required to be included in our Exchange Act filings. The
                        two Executive
                        Officers responsible for the financial reporting and disclosure
                        are in
                        direct control of the books and records of the Company and
                        are involved
                        first-hand in the decision making process for material
                        transactions.b)
                    There
                        have been no significant changes in our internal controls
                        or in other
                        factors, which could significantly affect internal controls
                        subsequent to
                        the date we carried out our
                        evaluation.
  27
  PART
          II —
          OTHER INFORMATION
 **Item
          2. Unregistered sales of equity securities**
  The
          following securities were issued in the first quarter ended March 31, 2005
          pursuant to exemptions from registration provided by Section 4(2) of the
          Securities Act of 1933 and Regulation D promulgated thereunder and not
          otherwise
          reported on Form 8-K.
  Between
          the period of January 14, 2005 and January 26, 2005,the Company issued
          380,000
          shares of the Company’s restricted common stock, par value $.001 per share to
          Laurus Funds, the holders of the Convertible Note due 2006, for the conversion
          of $304,000 of principal amounts owed under the Laurus Note. The Laurus
          Note has
          a conversion price of $0.80 per share.
  On
          February 28, 2005 the Company granted 300,000 five-year stock purchase
          warrants
          to purchase 300,000 shares of the Company’s common stock at a price of $0.95 per
          share, to Laurus Funds in conjunction with a waiver and certain amendments
          to
          the registration rights agreements with Laurus Funds.
  On
          March
          31, 2005 the Company issued 1,591,504 shares of the Company’s restricted common
          stock as payment for certain early termination fees in connection with
          the
          repayment of all amounts due to Laurus Funds as of March 31, 2005, including
          the
          repayment of the 7% Convertible Note and the borrowings under the Laurus
          Facility.
  **Item
          6.
          Exhibits**
   31.1
                  Certification
                      by CEO pursuant to 18 USC Section 1350 as adopted bySection
                      302 of the Sarbanes-Oxley Act of 2002.31.2
                  Certification
                      by CFO pursuant to 18 USC Section 1350 as adopted bySection
                      302 of the Sarbanes-Oxley Act of 2002.32.1
                  Certification
                      by CEO pursuant to 18 USC Section 1350 as adopted bySection
                      906 of the Sarbanes-Oxley Act of 2002.32.2
                  Certification
                      by CFO pursuant to 18 USC Section 1350 as adopted bySection
                      906 of the Sarbanes-Oxley Act of 2002.
 28
 **SIGNATURES**
  In
          accordance with the requirements of the Exchange Act, the registrant caused
          this
          report to be signed on its behalf by the undersigned, thereunto duly
          authorized.
  
 July
                      25,
                      2005INYX,
                    INC.By:
                  /s/
                    John
                    HamerskiJohn
                      Hamerski,
                    Vice
                      President and CFO
 
  29